Banking Sector Comes Under Scrutiny
Harare (Financial Gazette, December 14, 2000) - Zimbabwe's Parliament will
soon debate a motion calling for the appointment of a special committee to
investigate alleged profiteering by the country's banking sector, already under
heavy public criticism because of punitive interest rates.
The motion was moved last week by Parliament's Foreign Affairs, Industry and
International Trade Committee chairman Philip Chiyangwa and ZANU PF Member of
Parliament for Chivi South Charles Majange.
"What will happen is that we will discuss the motion, adopt it, then there will
be an investigation and a report will be compiled, which may recommend what
interest rates should be," Chiyangwa told the Financial Gazette this week.
"The motion has high priority and is a bipartite one. We're hoping that it may
not be necessary to discuss the motion in the House and that it may be adopted
as it is."
According to the motion, an investigation into the banking sector is necessary
because of concern that financial institutions are "exploiting the masses"
through high lending rates and that they are profiteering at the expense of
consumers.
The level of profits reported by financial institutions demonstrates the level
of profiteering in the sector, the motion charges, adding that banks are
"causing hyperinflationary lending" by putting mark-ups on the bank rate, which
is pegged at two to 2,5 percentage points above Zimbabwe's inflation.
The motion also calls attention to the spreads between deposit and lending
rates, which banks have been criticised for in the past.
Chiyangwa said if Parliament appointed a committee to investigate the financial
sector, it should look to Kenya, which recently passed legislation on interest
rates, as an example when coming up with recommendations.
Kenya has passed a controversial Bill that puts a ceiling on what commercial
banks can charge for loans, compels financial institutions to pay depositors at
least 70 percent of the latest treasury bill rate and bars banks from charging
interest on a loan where the accumulated interest has reached more than 150
percent of the original loan.
"The solution is to implement measures immediately that will control
exploitation by various players," Chi-yangwa said.
The Bankers' Association of Zimbabwe had not responded to written questions from
this newspaper on the issue yesterday. But the head of a local financial
institution, who declined to be named, said criticism of the banking sector was
a case of "shooting the messenger".
He said interest rates were high because of monetary policy, whose objective was
to curb inflation and money supply growth by ensuring that the cost of money was
high, thereby discouraging borrowing.
"Who sets monetary policy? It's the Reserve Bank in conjunction with the
government. They (critics of the banking sector) just want to shoot the
messenger. The problem is to do with the macroeconomic environment, that's the
real issue here."
University of Zimbabwe Business Studies lecturer Anthony Hawkins said: "The fact
of the matter is that if there is profiteering, there is no way that Parliament
can do anything about it.
"It can only be dealt with through increased competition and I would have
thought we had quite a lot of competition already."
Analysts said an investigation of local financial institutions, already feeling
the effects of Zimbabwe's economic instability and loan defaults and are
uncomfortably exposed to an unstable agricultural sector, would undermine
confidence in local banks.
"This is a messy debate, but an investigation into banks is going to do nothing
for the population of the country or inspire investor confidence," economic
consultant John Robertson told the Financial Gazette.
"Banks have never been more at risk of failing than they are now, and if banks
were to fail, they would take the whole economy with them."
Chiyangwa has given notice that he will move a motion in Parliament calling for
the establishment of a special committee to investigate how individuals have
benefited from public and private institutions.
Chiyangwa said his motion, set for debate in the House early next year, would
seek to address public perceptions that wealth accumulation in Zimbabwe has
benefited only a few people who are aligned to the ruling ZANU PF party.
He said the rich needed to account for their enrichment as a way of restoring
public confidence, saying the gap between the rich and poor in the country is
widening at an alarming rate.
The motion has been seconded by ZANU Hurungwe MP Rueben Marumahoko.
Chiyangwa, a business-man and self-proclaimed campaigner for black economic
empowerment, was earlier this year challenged in Parliament by David Coltart,
opposition Movement for Democratic Change MP for Bulawayo North, to explain how
he accumulated his wealth.
By Staff Reporter
Copyright 2000 Financial Gazette. Distributed by AllAfrica Global Media
(allAfrica.com).
-0-
*** end of story *** |
